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Risk Management Plan

The document discusses project risk management and creating a risk management plan. It begins by outlining the benefits of risk management for project justification, lower costs, prioritization, and management support. It then discusses defining a risk management plan, which includes methodology, roles and responsibilities, budgeting, timing, risk categories using a risk breakdown structure, definitions of impact and probability scales, and reporting formats. The key inputs, tools and techniques, and outputs of creating a risk management plan are also summarized.

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Jignesh
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483 views27 pages

Risk Management Plan

The document discusses project risk management and creating a risk management plan. It begins by outlining the benefits of risk management for project justification, lower costs, prioritization, and management support. It then discusses defining a risk management plan, which includes methodology, roles and responsibilities, budgeting, timing, risk categories using a risk breakdown structure, definitions of impact and probability scales, and reporting formats. The key inputs, tools and techniques, and outputs of creating a risk management plan are also summarized.

Uploaded by

Jignesh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Project Risk Management

Risk Management Plan

Outline
Review Project Risk Management Chapter 1
Benefits of Risk Management
Plan Risk Management
What is Risk Management Plan?
Plan Risk Management: Inputs
Plan Risk Management: Tools & Techniques
Plan Risk Management: Outputs
Definition of Impact & Probability Scales
Risk Breakdown structure
Risk Profile
3

Why Projects fail?


1. They are actually impossible
2. They are over constrained
3. They are not effectively managed

Benefits of Risk Management


Project Justification:
Enhanced chances of project achieving its objectives.
Risk awareness on failure modes demonstrate project feasibility (decision on
whether to continue or abort or transform)
Awareness on opportunities demonstrate project value

Lower cost and less Chaos:


Lowers costs by avoiding unforeseen problems avoidance or reduction of
rework, avoidance of high impact risks through analysis of root causes.
Minimizes chaos through proactive planning

Project Prioritization and Management Support


High risk projects with thorough risk plan and preparation for handling possible
problems can improve project priority
Project risks result in support from management and other project stakeholders
5

Benefits of Risk Management


Project portfolio Management
Maintenance of appropriate mix of projects of low and high risks in proportion consistent
to business objectives.

Fine-tuning plans
Risk analysis triggers changes in the plan, new activities and resource shifts
May also shift overall project structure or basic assumptions

Establishing Management Reserve


Justifies management reserve based on uncertainty of project outcomes
Provides rationale and magnitude of required reserve

Project communication & Control


Information on likelihood and consequence enables in defining realistic project
objectives, determining budgets, obtaining staff, setting deadlines, negotiating project
changes
Enables the team to pay attention on weaknesses of the project for avoiding difficulties
Helps in negotiation with project sponsors
6

Risk Event Graph

How do we manage Risk?


1.
2.
3.
4.
5.
6.

Risk Management Planning


Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control

Risk
Managemen
t Planning

Risk
Identificati
on

Qualitative
Risk
Analysis

Quantitativ
e Risk
Analysis

Risk
Response
Planning

Risk
Monitoring
and
Control
8

Plan Risk Management


The process of defining how to conduct risk management
activities for a project
The plan is key for
Establishing visibility of importance of risks to the organization
Establishing risk management process for the project
Obtaining agreement and support from all stakeholders
Effective risk management over the project life cycle
Acquiring sufficient resources & time for risk management activities
Establishing agreed upon baseline for evaluating risk

Begin when the project is conceived and complete early during


project planning
9

What is Risk Management Plan?


Methodology Approach, tools, & data
Roles & Responsibilities
Budgeting Resources to be put into risk management
Timing When and how often
Risk Categories Risk Breakdown Structure (RBS)
Definitions Risk probabilities and impact
Probability and Impact Matrix
Stakeholder tolerances
Reporting formats
Tracking
10

Risk Management Planning


Inputs
Project Management Plan
Project Charter

Tools & Techniques

Analytical Techniques

Expert Judgment

Planning Meetings

Stakeholder Register

Outputs

Risk Management Plan

Enterprise Environmental Factors


Organizational Process Assets

Risk
Managemen
t Planning

Risk
Identificati
on

Qualitative
Risk
Analysis

Quantitativ
e Risk
Analysis

Risk
Response
Planning

Risk
Monitoring
and
Control

11

Plan Risk Management - PMBOK

Plan Risk Management: Inputs, Tools & Techniques, and Outputs

12

Plan Risk Management - PMBOK


How
much
time
should we spend?
Who will be involved?
How
should
perform
management?

Plan Risk Management Data Flow Diagram

we
risk

13

Risk Management Plan: Inputs


1. Project Management Plan
Subsidiary project management plans and baselines are considered as
inputs for Risk Management plan
Risk Management plan will also be a component of Project
Management Plan
Risk Management Plan provides baseline for risk affected areas
including scope, schedule and cost

2. Project Charter
Provides inputs on high level risks based on high level project
descriptions and high level requirements

3. Stakeholder Register
Details of projects stakeholders and overview of their roles
14

Risk Management Plan: Inputs


4. Enterprise Environment Factors
Environment factors that can influence Risk Management Plan
Include Risk Attitude, Risk Tolerance (degree or Risk that an
organization can withstand)

5. Organizational Process Assets


Risk categories
Definitions, Concepts & Terms
Risk Statement Formats
Standard Templates
Roles & Responsibilities
Level of Authorities
Lessons Learned etc.

15

Risk Management Plan: Tools &


Techniques
1. Analytical Techniques

Understand and define overall risk management context of the project


Stakeholder risk attitude
Strategic Risk exposure of the project

Techniques
Stakeholder Risk profile analysis -> qualify risk appetite & tolerance
Strategic Risk scoring sheets -> High level assessment of risk exposure

Allocate appropriate resources and focus on risk management activities

2. Expert Judgment
Judgment & expertise from groups of individuals with training & knowledge on
the subject area:

Senior Management
Project Stakeholders
Project managers who worked on the same area
Subject Matter Experts
Industry Groups & Consultants
Professional & Technical Associations

16

Risk Management Plan: Tools &


Techniques
3. Meetings
Planning meetings which include project manager, selected
team members and stakeholders
Definition of high level plans for Risk Management
Risk management responsibilities
Cost and schedule elements updates
Contingency Reserves
Templates for risk categories, levels, types, probabilities,
impact
Probability Impact Matrix and tailoring specific to project
17

Risk Management Plan: Outputs


1. Risk Management Plan
Component of project management plan
Describes how risk management activities will be structured and
performed
The plan includes
Methodology: Approach, tools and data sources that will be used to perform
risk management of the project
Roles & Responsibilities: Defines the lead, support, and risk management
team members for each type of activity in the risk management plan and
clarifies their responsibilities
Budgeting: Funds needed based on resources assigned for inclusion in the
cost baseline, establishes protocols for applying contingency and
management reserves.
18

Risk Management Plan: Outputs


Timing: Defines frequency of performing risk management processes,
establishes protocols for application of schedule contingency reserves,
establishes risk management activities for inclusion in schedule baseline

Risk Categories: Means of grouping different causes of risk. It can be an


RBS (Risk Breakdown structure) or custom categorization framework. A
project then needs to customize the approach according to needs.

Definitions of Probability & Impact: Definition of different levels of Risk


Probability and Impact specific to project context.

Probability & Impact Matrix: Grid for mapping the probability of the risk
and its impact on the project activities if it occurs. Risks are prioritized
based on the rating through this grid.

19

Risk Management Plan: Outputs


Revised Stakeholder tolerances: Stakeholder tolerances may be
revised if required in the projects context.

Reporting formats: Define how the outcomes of risk management


process will be documented, analyzed and communicated. Describes the
content and format of risk register and any other risk reports.

Tracking: Documents how risk activities will be recorded for the benefit
of the current project and how risk management processes will be
audited.

20

Definition of Impact Scales - Example

21

Definition of Probability Scales Example


Probability (Likelihood)

Probability Scale

Not Likely

0.1

Low

0.3

Moderate

0.5

High

0.7

Expected

0.9

22

Impact and Probability Customizing to


a project
Impact Scale
Consequence

Extreme

High

Moderate

Low
Negligible

Probability Scale

Health and Safety

Scale

Fatality or multiple
fatalities
expected

0.8

Severe injury or
disability likely; or
some potential
for fatality
Lost time or injury
likely; or some
potential for
serious injuries;
or small risk of
fatality

0.4

Likelihood
Class
Not Likely
(NL)

Low (L)

0.02

No concern

0.01

Scale

<0.01% chance
of
occurrence

0.1

0.01 - 0.1%
chance of
occurrence

0.3

Moderate
(M)

0.1 - 1% chance
of
occurrence

0.5
0.7

High (H)

1 - 10% chance
of
occurrence

Expected
(E)

>10% chance of
occurrence

0.9

0.1

First aid required; or


small risk of
serious injury

Likelihood of
Occurrence
(events/year)

23

Risk Breakdown Structure


A risk breakdown structure (RBS) organizes potential
sources of risk to the project.
Functioning much like a work breakdown structure, an
RBS arranges categories into a hierarchy.
This approach allows the project team to define risk at
very detailed levels.

24

Risk Breakdown Structure - Example


Project

Business

Technical

Organizationa
l

Project
Management

Competitors

Specifications

Funding

Estimates

Suppliers

Limited
design time

Prioritization

Scheduling

Hardware

Resource
Availability

Communicati
on

Licensing

Regulations /
Policies

Change in
policies

25

Risk Profile
A risk profile is a list of questions that address
traditional areas of uncertainty on a project.
These questions are designed and developed from the
experience of past projects.

26

Risk Profile - Example


Technical Requirements:
Are the requirements stable?

Design
Does the design depend upon optimistic
assumptions?
Does the design involve any approach to new
methods?

Testing
Will testing equipment be available when
required?
Is there a possibility of failure of test equipment?

Development / Execution
Is the process supported by procedures, tools and
methods?

Schedule
Is there any dependency of schedule on other
projects / external factors?

Budget
How reliable are the estimates?
What is the degree of penalty for overruns / underruns?

Quality
Are quality considerations built into design?

Management
Do stakeholders know their responsibilities?
Is there sufficient senior management support for the
project?

Work Environment
Do people work cooperative across teams?

Resourcing
Is the staff skilled?
Does the project adequately staffed?

Customer
Does the customer understand the project deliverables
and communication path?
27

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